Background

Medupi is a large coal power station located in the Limpopo Province near the town of Lephalale. The power-station will be powered by 6 x 800 Mega Watt (MW) steam-powered turbines to produce a maximum demand of 4,800MW of power. Massive coal-fired boilers will be used to provide steam for the turbines. The South African Government backed the project as they believe the plant is required to supply vital electricity to South Africa over the long-term. Many of the country’s power plants are at the end of their useful life and no new large-scale power stations have been built for almost two decades.

However, when looking at some of the statistics relating to Medupi one must question the South African Government’s decision to further increase the country’s reliance on coal for electricity generation.

Environmental Effects

Once Medupi is completed, the environmental damages will only start to be seen. Up to now only the costs and delays have been highlighted in the project. However to run the Medupi there are massive requirements for water and coal.

Water

The power station will require huge amounts of water to generate the steam needed to power the 6 enormous turbines. Eskom has said that Medupi will require 14 billion litres of water if a flue gas desulphurisation plant (removes sulphur dioxide, which is good for air quality)However James Blignaut, an Environmental and Resource Economist Professor at University of Pretoria believes this figure will be around 21 billion litres per year.

The Crocodile West Water Supply System, which combined with the Mokolo Dam yield, would be unable to supply the demand for water in Limpopo by the end of 2012. One must ask the question where an additional 14 – 21 billion litres of water is going to come from to supply Medupi. An average petrol truck can hold 30 000 litres of water, this would equate to around 700 000 trucks per annum.

Carbon Emissions

South Africa falls within the top 10 worst carbon dioxide emitters in the world (around 500 million tonnes of CO2e per annum). This is largely because of two companies, Eskom and Sasol who make up around 310 million tonnes of CO2e or two-thirds of the countries emissions.

It is estimated that a coal power station requires around 8.3 tonnes of coal per day per MW. Medupi will operate 365 days per year for its 4,800MW maximum capacity. This equation is shown below:

8.3 x 4 800 x 365 = 14 600 000 tonnes of coal per annum

To calculate the emissions associated to this coal we will use the IPCC 2006 data base which estimates 1 kilogram of coal with a calorific or energy content of 24 MJ/Kg and a carbon content of 25.8 carbon per kg of coal. The emission factor based on these inputs is 1 tonne of coal = 2.27 tCO2e.

14 600 000 x 2.27 = 33 142 000 tCO2e

This one project will increase South Africa’s emissions by 6.6%. This roughly equates to the same carbon emissions that 7 million cars would emit for one year.

Costs

Project Costs

The project has seen several delays and the estimated completion is expected to be by the middle of 2014. Regardless of the reasons why there were the delays, the total costs of Medupi are expected to be more than R150bn which is 200% above the original budget. This makes Medupi the most expensive coal powered station in the world, working out to around R32 per Watt installed. It should be noted that the most expensive solar panels available cost around R26 per Watt installed. This is clean, free energy after the panels are installed.

It is likely that the added costs of Medupi will be passed onto the consumer in electricity bills. One should raise the question why this money has not been invested into clean energy projects in South Africa or to subsidise off grid renewable energy projects.

Indirect costs from delays

This cost does not take into account the fact that the national grid capacity sits below 1% during winter months. The total indirect cost of the delays to Medupi are estimated to be R1.4 trillion from opportunity costs of lost and delayed growth, capacity restrictions and jobs due to the constrained grid.

Coal costs

From the above we know that Medupi will use around 14.6 million tonnes of coal per annum. One must remember that companies export South Africa’s good coal and Eskom essentially receive the ‘left overs’. This means that more coal is needed to be burnt to provide the same amount of energy from good coal. The 14.6 million tonnes of coal is thus an estimate, the figure could be higher. The current price Eskom will pay for coal will be between R300 and R400 for a short-term contractor, while long-term contractors agree to around R150 per tonne of coal. The costs of coal per annum  are estimated between R2.19 and R5.84 billion depending on the negotiating skills of Eskom’s procurement department.

Carbon Tax

South African will introduce a carbon tax from the 1st January 2015. The tax has the following features:

  • The tax rate will be R120 per tonne of carbon dioxide rising 10% per year
  • The tax will only apply to Scope 1 direct on site emissions
  • There will be an automatic allowance of 60% across all industries

What will Medupi’s carbon tax liability add up to?

33 142 000 tCO2e x R120 x 40% = R1 590 000 000

Medupi essentially will be taxed R1.6 billion for its first year of operation in 2015. The question begs to be answered then, will Eskom pass this tax onto the consumer?

Conclusion

With the above information, should South Africa stick to its current energy profile where over 90% of the grid make up is coal based? Many of the country’s power stations are at the end of their useful life. What energy should be used to replace coal? Renewable energy? Nuclear? Imported hydro? These are the questions which the Government will need to answer as South Africa continues its monopolistic approach to energy. One thing is for sure, electricity prices will continue to rise above inflation levels if you are on the national grid.